The American economy and Boeing are at risk of losing at least $600 billion worth of order over embattled B737Max aircraft type, already grounded by 41 countries, including the United States.
The renewed safety concerns, following its second crash Sunday, sparked collective protests and threats by some Boeing’s big customers to reconsider purchases.
The development puts over 450 active B737Max aircraft and another 5000 on the order book, at serious risk.
Already, airlines’ operators are already feeling the pinch, either with the challenges of filling the void created by grounded fleets or outright refusal of passengers to board B737Max aircraft where they still operate.
The state-of-the-art aircraft is the bestselling modern passenger aircraft ever, and the most efficient in the industry. Though most recent, it is already the workhorse of today’s aviation and operated by 54 airlines in the world, given its power, speed and fuel efficiency.
But Sunday’s disaster, the second crash to B737Max plane type in just five month, the specific Max 8 model has been grounded by U.S., Nigeria, India, the United Arab Emirates (UAE), China, Indonesia, Malaysia, Iceland and Germany, and the airlines LOT Polish.
The European Union and UK Civil Aviation Authority have banned the entire Boeing 737 Max fleet. Australia, New Zealand, Singapore, Oman, France, Ireland, India, United Arab Emirates, and Kuwait, did so too. Turkish Airlines and Norwegian Airlines have ditched the planes for now.
Airlines reconsider order
VietJet Aviation JSC, which doubled its order to about $25 billion last month, said it will decide on its future plans once the cause of the tragedy has been found.
Kenya Airways Plc is reviewing proposals to buy the Max and could switch to Airbus SE’s rival A320. Russia’s Utair Aviation PJSC is seeking guarantees before taking delivery of the first of 30 planes.
That’s as Indonesia’s Lion Air firms up moves to drop a $22 billion order for the 737 in favor of the Airbus jet, according to a person with knowledge of the plan.
Separately, Garuda Indonesia plans to cut orders of the Boeing plane and a $5.9 billion order from a unit of Saudi Arabian Airlines hangs in the balance.
Lion Air was already looking at scrapping its Boeing deal after October’s crash, which killed 189, and the latest disaster has made co-founder Rusdi Kirana more determined to cancel the contract,
The 737, which first entered service in the late 1960s, is the aviation industry’s best-selling model and Boeing’s top earner. The re-engineered Max version has racked up more than 5,000 orders worth in excess of $600 billion, including planes that have already been delivered.
Boeing, whose shares have lost 11 per cent of their value this week, faces escalating financial risk after two disasters involving its newest narrow-body jet in the past five months. The stock inched up 0.5 per cent on Wednesday in New York after seeing its biggest two-day drop in almost a decade.
Indeed, the only real rival to Boeing is European planemaker Airbus, whose production line for the A320neo is full well into the next decade with over 7000 planes on order.
Anything but B737Max
Travel website, Kayak, is making changes to let customers exclude specific aircraft types from searches, and booking sites are looking to reroute passengers.
The first move by one of the big U.S. travel websites to adapt its service came as hundreds of jittery customers of Southwest, United and American Airlines took to social media to seek flights on planes other than the Boeing 737 MAX, which was involved in the fatal crash on Sunday.
Other travel agents and websites reported a raft of re-bookings as a result of cancellations caused by the grounding of two-thirds of 737 MAX jets by a long list of global authorities and airlines outside North America.
“We’ve recently received feedback to make Kayak’s filters more granular in order to exclude particular aircraft models from search queries,” a spokeswoman for the website told Reuters in an email responding to questions.
“We are releasing that enhancement this week and are committed to providing our customers with all the information they need to travel with confidence.”
Kayak is a sister site of Booking.com and Agoda.com, used by millions of travelers each year to book flights and hotels.
Carlson Wagonlit Travel, which manages travel for big global businesses, said some clients had asked to explore the possibility of temporarily restricting travel on Boeing 737 MAX 8 planes.
“This could potentially result in travelers being left with fewer flight options and susceptible to higher airfares, depending on the route,” CWT said. “We are working with clients to understand the practicality and the implications of putting such restrictions in place.”
The Twitter accounts of Southwest and American Airlines were swamped with customers asking for refunds or to be moved to other flights, and complaints about long hold times before being connected to a representative.
The United Arab Emirates, a key international travel hub, barred the Boeing 737 Max 8 and 9 from its airspace following the crash.
The Emirates’ General Civil Aviation administration cited the similarities between Sunday’s Ethiopian Airlines flight and another by Indonesia’s Lion Air last year for its decision.
The budget carrier FlyDubai, owned by the Dubai government, uses the aircraft as a workhorse of its fleet. It flies 11 Boeing 737 MAX 8s and two MAX 9s.
FlyDubai said, in a statement, that she “is adjusting its schedule to minimise disruption to passengers.”
“If the planes are grounded for more than one or two months, production may be affected, hurting Boeing’s manufacturing subcontractors,” Lin Zhijie, a veteran market watcher, said adding that deliveries of new aircraft could stop while the planes are grounded.
Chinese companies have participated in the production of almost all Boeing models, including the 737, 747, 767, 777 and 787 series. More than 35 Chinese companies are direct suppliers to Boeing, producing such components as the rear fuselage section and front boarding gates.
The 737 Max family reached a sales milestone in December 2018, passing 5,000 net orders with 181 new sales in December.
“Grounding of a certain model can be quickly offset with other models for airlines that have large fleets, and it won’t have much impact on operations. But for small airlines, a suspension of even one or two planes can disrupt the entire system,” Zou Jianjun of the Civil Aviation Management Institute of China said. “The longer the suspension, the more pressure the small airlines will suffer.”
The grounding, experts reckoned, definitely will hurt the carrier’s business, but it is hard to calculate the loss because it’s unclear how long the suspension will last.